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Federal efforts to aid minority businesses began in the 1960's when th

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Manager
Manager
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S
Joined: 05 Jul 2017
Posts: 153

Kudos [?]: 31 [0], given: 162

Location: India
Concentration: Entrepreneurship, Technology
GMAT 1: 700 Q49 V36
Re: Federal efforts to aid minority businesses began in the 1960's when th [#permalink]

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New post 03 Sep 2017, 00:08
Hey GMATNinja and GMATNinjaTwo

Can you help to explain Q5 and Q7? I got them wrong

5. The author refers to the "financial and operating problems" (line 38) encountered by MESBIC's primarily in order to

(A) broaden the scope of the discussion to include the legal considerations of funding MESBIC's through sponsoring companies
(B) call attention to the fact that MESBIC's must receive adequate funding in order to function effectively
(C) show that sponsoring companies were willing to invest only $500,000 of government-sponsored venture capital in the original MESBIC's
(D) compare SBA and MESBIC limits on minimum funding
(E) refute suggestions that MESBIC's have been only marginally successful



7. Based on information in the passage, which of the following would be indicative of the pragmatism of MESBIC staff members?

I. A reluctance to invest in minority businesses that show marginal expectations of return on the investments
II. A desire to invest in minority businesses that produce goods and services likely to be of use to the sponsoring company
III. A belief that the minority business sector is best served by investing primarily in newly established businesses

(A) I only
(B) III only
(C) I and II only
(D) II and III only
(E) I, II and III

Kudos [?]: 31 [0], given: 162

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Joined: 29 Jan 2015
Posts: 40

Kudos [?]: 10 [0], given: 217

Location: India
Concentration: Marketing, Entrepreneurship
GPA: 3.7
WE: Information Technology (Internet and New Media)
Re: Federal efforts to aid minority businesses began in the 1960's when th [#permalink]

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New post 17 Sep 2017, 08:10
15 minutes.
8/9
I think it's level between 650 to 680 (not 700 level question)

Kudos [?]: 10 [0], given: 217

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GMAT Club Verbal Expert
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Status: GMAT and GRE tutor
Joined: 13 Aug 2009
Posts: 1049

Kudos [?]: 1594 [1], given: 400

Location: United States
GMAT 1: 780 Q51 V46
GMAT 2: 800 Q51 V51
GRE 1: 340 Q170 V170
Re: Federal efforts to aid minority businesses began in the 1960's when th [#permalink]

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New post 20 Sep 2017, 20:53
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Expert's post
pikolo2510 wrote:
Hey GMATNinja and GMATNinjaTwo

Can you help to explain Q5 and Q7? I got them wrong

5. The author refers to the "financial and operating problems" (line 38) encountered by MESBIC's primarily in order to

(A) broaden the scope of the discussion to include the legal considerations of funding MESBIC's through sponsoring companies
(B) call attention to the fact that MESBIC's must receive adequate funding in order to function effectively
(C) show that sponsoring companies were willing to invest only $500,000 of government-sponsored venture capital in the original MESBIC's
(D) compare SBA and MESBIC limits on minimum funding
(E) refute suggestions that MESBIC's have been only marginally successful



7. Based on information in the passage, which of the following would be indicative of the pragmatism of MESBIC staff members?

I. A reluctance to invest in minority businesses that show marginal expectations of return on the investments
II. A desire to invest in minority businesses that produce goods and services likely to be of use to the sponsoring company
III. A belief that the minority business sector is best served by investing primarily in newly established businesses

(A) I only
(B) III only
(C) I and II only
(D) II and III only
(E) I, II and III

For #5, refer to the following portion:

Quote:
Following early financial and operating problems, sponsoring corporations began to capitalize MESBIC's far above the legal minimum of $500,000 in order to generate sufficient income and to sustain the quality of management needed.


This portion implies that BEFORE the sponsoring corporations began to capitalize MESBIC's far above the legal minimum, sufficient income was NOT generated and quality of management was NOT sustained (financial and operating problems). This implies that the increased capital was needed to avoid financial and operating problems. In other words, adequate funding (capital) is necessary to avoid financial and operating problems and, thus, function effectively.

Choice (B) is the best answer.

As for #7, MESBIC staffs are compared to MESBIC directors. The directors are said to "prefer deals that are riskier and less attractive than normal investment criteria would warrant," while the staffs would prefer that a more "prudent course" be followed to avoid the disappointing results of the original SBA. This suggests that the directors would be more likely to prefer a deal involving a business that shows marginal expectations of ROI (a deal that is less attractive than normal investment criteria would warrant), while the staffs would be reluctant to invest in such a business. This seems to fit with the first option:

Quote:
I. A reluctance to invest in minority businesses that show marginal expectations of return on the investments

We are also told that the staffs "feel that minority entrepreneurs and businesses should be judged by established business considerations." This evidence further supports the first option, since the staffs would judge minority business by established business considerations (such as ROI expectations).

As for the second option, we are told that the "staff members believe their point of view is closer to the original philosophy of MESBIC's". So what do we know about the original philosophy of MESBIC's? The original function of the MESBIC's was to "provide capital and guidance to minority businesses that have potential to become future suppliers or customers of the sponsoring company." An advantage of this approach is described in the third paragraph: "since potential markets for the minority businesses already exist through the sponsoring companies, the minority businesses face considerably less risk in terms of location and market fluctuation." In other words, those minority businesses would face less risk because they will become suppliers of customers of the sponsoring companies.

Quote:
II. A desire to invest in minority businesses that produce goods and services likely to be of use to the sponsoring company

Thus, a group who's point of view is similar to this original philosophy of MESBIC's would be in favor of investing in businesses that produce goods and services likely to be of use to the sponsoring company. This fits with the original intention of the MESBIC's. Furthermore, it reduces risk, which would appeal to the risk-averse staffs

Quote:
III. A belief that the minority business sector is best served by investing primarily in newly established businesses

As for the third option, there is nothing in the passage suggesting that this is the belief of the staffs. Furthermore, we know that the staffs are risk-averse, and investing in newly established businesses is likely a riskier approach that would be preferred by the directors.

Thus, options I and II fit, and choice (C) is the best answer.
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Re: Federal efforts to aid minority businesses began in the 1960's when th   [#permalink] 20 Sep 2017, 20:53

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